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Housing market: The ‘shocking’ impact of mortgage rates on Utah housing

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According to the latest survey by one of Utah’s leading housing experts, 5% mortgage rate We’ve been thinking about the cost of buying a home and what’s ahead of the Utah housing market in the coming years.

He predicts that the market is around the corner and ready to start chilling.However Don’t hold your breath because of “bubble burst” Or in the case of an actual price cut.

Dejan Eskic, a senior researcher at the Kem C. Gardener Policy Institute at the University of Utah, told Deseret News in an interview: But he added, “I don’t think prices will go negative in a year and a half next year, but I don’t think we’ll see any crazy (price) acceleration.”

The reasons are as follows:

“Shocking” rate hike: Mortgage rates soared from 3.76% in February this year to 5.23% in May as the Federal Reserve is fighting inflation. This was “one of the most dramatic increases on record in such a short period of time,” Eskic wrote. Blog post published on Wednesday..

Historically rate of up “Prices are starting to ease and even stall,” Eskic said. “But Utah’s home prices rose 24.4% between April 2021 and April 2022, but interest rates rose from 3.06% to 4.98% over the same period.”

Eskic was “shocked” in an interview with Deseret News to see how Utah’s homebuyers were willing to lock themselves in to buy a home and how it affected their monthly mortgage payments. Told.

Median period from April 2021 to April of this year Monthly mortgage payments surged about $ 1,000 From about $ 1,629 to $ 2,556 — a 56% jump.

Still, Utah homebuyers are still in a hurry to buy, spurring a still highly competitive environment where homes pop out of the market within a few days.

“More shocking is that the median number of days in the market is 6 days!” Eskic writes.

Focusing on Salt Lake County, Utah’s most populous county, housing in April Sold at a median of 5 days, According to the Salt Lake Board of Realtors. The median value for all housing types in Salt Lake County was $ 550,000 in April, up 26% year-on-year.

Why did this happen? When the Federal Reserve lowered mortgage rates in the rage of the COVID-19 pandemic, those low rates “hidden” Utah’s steadily rising home prices for some time. Eskic said.

Home prices in Utah have risen to around $ 73,000, but homebuyers were buying at relatively similar monthly mortgage rates from mid-2018 to early 2021.

“But since the beginning of 2021, monthly payment growth has outpaced price growth,” Eskic writes.

“So what can we expect from future home prices?”

Housing Market Forecast: Eskic writes that home price forecasters are now forecasting domestic prices to rise 10.4% in 2022 and another 3.4% in 2013.

However, there is an important asterisk in the Utah market.

Historically, Utah’s home price growth rate “tends to be slightly higher than national figures, so we can assume that home prices will follow this trend,” Eskic wrote.

So what does it take to actually lower the price?

“Long-term high interest rates and pre-pandemic inventory levels will create scenarios where prices fall or dare to fall,” Eskic writes.

Remember that Utah was there Suffering from housing shortage flat Before the pandemic drives the domestic market enthusiastically.. The housing shortage has only worsened, and homebuyers are still tight in stock, thus still a highly competitive market.

“We have a high rate, but we don’t have it in stock,” Eskic writes.

High interest rates have increased inventories of active homes for sale recently, but today’s inventories are still well below pre-pandemic levels.

“We are in a better supply than we were two months ago and we have a lot of options,” says Eskic. “But we are still 49% below what we should be at this time of the year.”

Prior to the pandemic, Eskic’s research found that there were 2.3 new home listings on the market for all homes sold. However, since January of last year, only 0.7 new homes have been listed per sale.

“For a balanced market, the ratio of sales to the active list should be in the range of 1.5 to 2.0 per month,” Eskic said.

Reasons for lower prices: Several factors indicate that rising house prices are slowing. One is obviously an affordable issue, Eskic said.

“With rising interest rates and prices, nearly 71% of Utah households Median price from home“He wrote.

He said it is leading more sellers to stay in their homes longer. Sure, the amount for sale may be attractive, but where else do you live? Combined with the surge in mortgage rates, it also “increases inventory challenges,” Eskic said.

Consider this:

According to an Eskic survey, about 75% (3 out of 4) of Utah’s mortgages are less than 4% and 31% are less than 3%.

Higher rates today could stop home sellers, especially those considering upgrades, from putting their homes on the market. Again, if you buy it elsewhere, you lose the low rate.

“Everyone just gets stuck. People aren’t going to sell their homes,” Eskic said.

Add another inventory pressure point of Utah’s rapid population growth.

“Oh, we expect another 248,539 households in Utah by 2030, but that’s another day,” Eskic wrote.

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